MF Global Agreement With CME Group Wins Court Approval

Aug. 10 (Bloomberg) -- The trustee liquidating MF Global
Inc. won court approval to receive $130 million from CME Group
Inc. to pay back the bankrupt brokerage’s customers and other
creditors.

U.S. Bankruptcy Judge Martin Glenn said in court papers
filed in Manhattan bankruptcy court today that the agreement can
go forward, overruling an objection from one customer. Glenn had
heard arguments in court on Aug. 8., including those from the
Commodities Future Trading Commission and Securities Investor
Protection Corp. in support of the pact.

“The agreement is the product of arm’s length
negotiations,” Glenn wrote, adding that it is in the “best
interests” of the brokerage’s estate.

Commodity customers who traded on U.S. exchanges will get
$65 million, with the same amount going to customers who traded
on foreign exchanges, while non-customer creditors will get
$16.5 million, trustee James Giddens has said. In total, CME
Group will return $175 million to the failed brokerage, settling
all disputes about how much of MF Global’s property and customer
property rested with the exchange.

Once Giddens receives the funds, he’ll ask the court for
authorization to make another distribution to customers, keeping
aside a reserve for any disputed claims, said Kent Jarrell, a
spokesman for Giddens.

CME Funds

“We’re pleased with Judge Glenn’s decision,” Jarrell said
in a statement. “Once we receive the funds from CME, we will
have additional property on hand for the return to customers.”

One customer, Paul Hamman, had objected, citing the
confidential nature of part of MF Global’s agreement with CME
Group and alleging the exchange had facilitated fraud at MF
Global. Glenn overruled his objections, saying his objections
were unsupported by facts.

Under the agreement, more than $30 million of CME’s claims
against MF Global will also have a lower priority when it comes
to getting paid than brokerage customers.

Giddens has set in motion distributions that will repay
commodity customers about 80 percent of what they’re owed for
funds missing from their segregated accounts. He has estimated
that there’s a gap of $1.6 billion between the money available
to pay them and what they’re owed.

Giddens said Aug. 1 that he’s still evaluating creditor and
customer claims, and may litigate those where an agreement can’t
be reached on what the brokerage owes. He said he still sees
lawsuits against former MF Global Chief Executive Officer Jon S.
Corzine, former chief financial officer Henri Steenkamp and
former assistant treasurer Edith O’Brien, among others, as a way
to recover more money for creditors.

The brokerage case is Securities Investor Protection Corp.
v. MF Global Inc., 11-02790, U.S. District Court, Southern
District of New York (Manhattan). The parent’s bankruptcy case
is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court,
Southern District of New York (Manhattan).